Oil Search production falls

Energy producer Oil Search has revealed falling production in its second quarter as a result of a processing plant shut down and declining output from its ageing oil fields.

The Papua New Guinea based Oil Search said total oil and gas production for the three months to June 30 were 1.94 million barrels of oil equivalent (mmboe), down on the first quarter's 2.0 mmboe.

Shares in Oil Search were up 6 cents, or 1.03 per cent, at $5.90 in morning trade.

During the prior corresponding period a year earlier, Oil Search produced 1.9 mmboe.

"This was a good result given the maturity of the oil fields and a scheduled shut down of the Agogo Processing Facility for maintenance during the period," Oil Search chief executive Peter Botten said.

The company said operating costs for the first half of 2010 were expected to be lower than the guidance for the full year of $US16 to $US18 per barrel of oil equivalent.

Advertisement

Production guidance for the 2010 full year remains unchanged at between 7.2 and 7.4 mmboe, Oil Search said.

The $16 billion PNG LNG (liquefied natural gas) joint venture, given the green light in March 2010, was a focus for Oil Search during the quarter, the company said.

"Key activities during the quarter were focused on the ongoing mobilisation of people and equipment to various locations in PNG, site preparation and early construction works," Oil Search said.

The company said it realised an average oil price for the second quarter of $US78.81 per barrel, seven per cent up on the first quarter, and an average price for the first half of $US76.31, 47 per cent up on the equivalent period in 2009.

Oil Search's revenue for the quarter was $142.7 million, seven per cent above the first quarter, primarily because of stronger oil prices.

At the end of June, Oil Search held $US1.35 billion in cash, excluding the balances from its joint ventures.

The company said $US503 million had been drawn down from the PNG LNG project finance facility.

It said during the second quarter it had been in discussions to expand LNG opportunities at the PNG LNG project.

"Resources for expansion may come from either existing project fields, discoveries where there is a high commonality of ownership interest with PNG LNG or exploration opportunities," Oil Search said.